USITC STUDY AND REQUEST FOR INFORMATION ON U.S. --

UNCLAS SECTION 01 OF 03 ACCRA 001681

SIPDIS

DEPT FOR AF/EX
DEPT PASS TO USITC LYN SCHLITT AND NANNETTE CHRIST

E.O. 12958: N/A
TAGS: EINV EFIN ECON ETRD PGOV PREL GH
SUBJECT: USITC STUDY AND REQUEST FOR INFORMATION ON U.S. --
SUB-SAHARAN AFRICAN TRADE AND INVESTMENT

REF: A. STATE 137500


B. 03 ACCRA 1295

C. 03 ACCRA 841

D. 03 ACCRA 933

E. 03 ACCRA 652

F. 03 ACCRA 2000

G. ACCRA 01234


1. In response to Ref A, Post submits the following
information to assist the USITC in its investigation for its
study, U.S. Trade and Investment with sub-Saharan Africa.
This cable builds on Post's previous submission of November
2003 (Ref B),and includes activities of USAID's West Africa
Regional Program (WARP),which is based in Accra, Ghana.

Developments in Economic, Trade or Investment Policy
-------------- --------------

2. 2003 was a good year for Ghana's economy, mainly due to
sound macroeconomic policies and high cocoa and gold prices.
Ghana is succeeding in getting the budget under control,
improving transparency and accountability in its use of
public resources, and is maintaining fiscal discipline as its
top economic priority. Real GDP growth was 5.2 percent for
2003, up from 4.5 percent in 2002. The cedi is stable,
foreign exchange reserves surpassed USD 1 billion, inflation
is falling, as are interest rates, and Foreign Direct
Investment (FDI) flows through June 2003 exceeded FDI for all
of 2002.


3. Standard and Poor's acknowledged the GoG's commitment to
sound economic management in September 2003, when it assigned
Ghana a "B-plus" sovereign credit rating. Standard and
Poor's based this rating on Ghana's macroeconomic performance
and reforms, political and social stability, and the
substantial debt reduction expected under the Highly Indebted
Poor Country (HIPC) initiative. Fitch Rating Agency
simultaneously rated Ghana's sovereign credit at "B" with a
positive outlook.


4. Ghana reached HIPC completion point in July 2004, and will
realize significant budgetary savings as a result. Total
debt forgiveness from IMF, World Bank, ADB and official
creditors will exceed USD 3.5 billion. As one of the few
stable, democratic countries in the region, Ghana is
increasingly seen as a gateway to West Africa and a hub for
international business, NGOs and international organizations.


Developments in Major Regional Groupings
--------------

5. Ghana is participating in talks on the ECOWAS Common
External Tariff (CET),which is based on the existing CET
shared by the eight member states of the predominantly
francophone West African Economic and Monetary Union (WAEMU).
The CET is supposed to go into effect January 1, 2005, with
each country phasing in new tariff levels over three years so
that all ECOWAS member states have harmonized tariff
structures by December 31, 2007.


5. Although the CET treaty was originally signed by ECOWAS
heads of state in 1975, and revised in 1993, the process was
resuscitated by the EU's declaration that it will only
negotiate trade agreements with or disburse European
Development Funds to regional groups after 2007, not
individual countries. Under the new Cotonou Agreement, the
negotiation of WTO-compatible new trading arrangements
between the EU and African, Caribbean and Pacific (ACP)
countries must be completed by 2008. The European Commission
proposes that regional reciprocal free trade agreements
replace the current non-reciprocal preferences in the trade
relations between the EU and ACP countries. The next round
of CET negotiations will take place in September.


6. The West African Monetary Zone (WAMZ),comprised of Ghana,
Gambia, Guinea, Sierra Leone and Nigeria, remains committed
to launch the West African Common Currency -- ECO -- in July

2005. Before this happens, the countries and the West
African Monetary Institute must first finalize and implement
plans for statistical harmonization, currency unification and
West African Central Bank operations. The countries must
also meet four preconditions: single-digit inflation, budget
deficits under 4 percent of GDP, foreign exchange reserves
covering over three months' exports, and domestic debt
limited to 10 percent of tax revenue. The West African
Central Bank, based in Accra, will manage the single monetary
policy and pooled foreign reserves, and will work to maintain
price stability.


7. WAMZ's goals in introducing the ECO are to create a larger
regional market, increase cross-border trade and investment,
achieve lower inflation and stable prices in response to good
monetary policy and financial discipline, maintain stable
exchange rates, and attract FDI. Although donors are
skeptical about the attainability of the July 2005 launch
date, they support the process because it provides stronger
external discipline to fiscal policy.
PRIVATIZATION EFFORTS
--------------

8. Ghana embarked on a privatization program in the early
1990s that resulted in the sale of more than 200 of
approximately 300 state-owned enterprises. The GoG's
privatization program stalled due to political sensitivities
surrounding certain industries, lack of legitimate partners
for divestiture, and the inefficiencies and management
concerns that render some industries less appealing. Refer
to Refs B, C and D for reporting on Ghana Commercial Bank
divestiture, water privatization efforts and cocoa sector
liberalization.

GHANA AND AGOA
--------------

9. Ghana's AGOA exports have increased rapidly, although
overall trade to the U.S. has declined. 2003 AGOA exports
were USD 40.6 million, compared to total exports to the U.S.
of USD 83.6 million. President Kufuor has announced several
special initiatives ) including textiles and industrial
starch -- aimed at taking advantage of AGOA, but they are
thus far small in scale. The GoG on occasion has extended
beyond its regulatory mandate of ensuring compliance with
AGOA regulations, and has sought to select specific companies
to export under AGOA. This has caused concern among private
businesses opposed to government interference. The
USAID-funded West Africa Trade Hub is assisting Ghana and
other countries in the region to take fuller advantage of
AGOA.


10. Ref E provides updated information for the President's
2003 AGOA report. Ref F, an AGOA Eligibility Review,
provided more detailed accounts of AGOA-related trade and
investment and GoG reform efforts. Ref G discusses the
potential impact in Ghana of ending the AGOA third country
fabric provision.

US TRADE CAPACITY BUILDING EFFORTS
--------------

11. USAID's West Africa Regional Program (WARP) provides
technical assistance to both WAMZ Common Currency and ECOWAS
Common External Tariff negotiations.


12. In March 2003, the U.S. inaugurated the West African
Trade Hub, which reinforces regional efforts to enhance trade
competitiveness. The USAID/WARP-financed Trade Hub focuses
on enhancing the potential of West African producers to sell
to the U.S. market under the Administration's Africa trade
initiative, thereby permitting the region to take greater
advantage of the increased trading opportunities provided
through AGOA.


13. The Global Trade and Technology Network (GTN) is a USAID
funded program that links companies around the world through
an electronic/internet-trading platform to establish
international trade and business linkages in the form of
joint ventures, direct sales or direct purchases,
agent/distributorships, licensing and franchise agreements.


14. Growth through Engendering Enterprise in ECOWAS Countries
(ECOGEE) is a three-year USAID/WARP-funded project that began
in September 2002. ECOGEE supports West African women's
efforts to overcome barriers to business development and
regional trade.


15. The U.S. Trade and Development Agency (USTDA) advances
economic development and U.S. commercial interests in Ghana
by funding various forms of technical assistance, feasibility
studies, training, orientation visits and business workshops
that support the development of a modern infrastructure and a
fair and open trading environment


16. West Africa International Business Linkages (WAIBL) is a
USAID/WARP-funded program to increase commercial partnerships
between U.S. and West African businesses. These
relationships can take many forms including export/import
agreements, joint ventures, and equity partnerships.


17. USAID/Ghana's Trade and Investment Reform Program (TIRP)
is a 5-year activity aimed at improving the investment
environment and technical/managerial capacity of Ghanaian
enterprises, reforming regulations that adversely impact
international competitiveness in sectors with the best export
potential and promoting non-traditional exports, including
tourism.


18. USAID/WARP is supporting a USDA-APHIS advisor, to be
based in Ghana and working in the West Africa region. The
advisor will work with WATH, ECOWAS, WAEMU, West African
governments, and private businesses to assist agricultural
producers in preparing their products for export to the U.S.
market. Such assistance will include the facilitation of the
design and submission of Pest Risk Assessments, improving
regional capacity to analyze plant health risks, augmenting
the trade capacity of regional producers and governments, and
the dissemination of information regarding U.S. regulations
on the importation of agricultural goods and the Sanitary and
Phyto-Sanitary (SPS) regulations of the U.S. and WTO.


19. The USAID/WARP funded Market Information System project
aims to enhance economic growth in West Africa through
increased intra-regional trade in agricultural commodities
and inputs. This will be accomplished by strengthening
networks of market information systems and traders'
organizations. This activity will provide critical market
information like commodity prices through radio broadcasts
and mobile-phone subscriptions to traders and producers to
spur trade. The end result of this effort will be increased
regional economic integration in West Africa through closer
economic ties and improved food security.


20. The Department of Treasury also participates in
capacity-building assistance through the U.S. Customs and
Border Protection, which in May 2003 conducted a customs
operation and training needs assessment to assess Ghana's
compliance with AGOA and identify areas that could benefit
from additional training. Treasury's Debt and Tax teams
provide resident and intermittent advisors to the GoG. The
tax team provides management training to Ghana's IRS and VAT
agencies, and assists with improving customer service and
taxpayer assistance, expanding the taxpayer base and
improving delinquent collections.


21. The Treasury debt team's resident advisor supports and
advises the Finance Ministry and Central Bank on domestic
debt issues. Projects have included coordinating with the
rating agencies for Ghana's first sovereign credit ratings,
revising government debt auction procedures, implementing a
cash forecasting system for use by the GoG, and creating and
introducing new debt securities to help with the transition
to a more efficient capital market. The debt team has also
provided technical assistance to help design and implement a
new central depository system for government securities and
equities.
YATES